DETROIT – The American auto industry is running on fumes.

General Motors, the nation’s largest automaker, warned Friday that it may run out of money by the end of the year after piling up billions in third-quarter losses and burning through cash at an alarming rate. The carmaker’s results came on the heels of similar dismal quarterly earnings from the Ford Motor Co., raising new concerns about the prospects for survival of the two largest American automakers.

The situation is so severe, GM has suspended talks to acquire Chrysler and is appealing to the government for help as the slumping economy drags cars sales to their lowest level in a quarter century. GM chairman and chief executive Rick Wagoner said the company would “take every action” possible to avoid bankruptcy.

GM also planned more job cuts, including another 5,600 salaried and factory workers. But company officials cautioned that those measures alone would not be enough and that federal aid is essential.

GM said its revenue in the third quarter declined 13 percent, to $37.9 billion, compared with $43.7 billion a year ago, on weak demand in its core North American and European markets. The loss was $2.5 billion, or $4.45 per share.

The company also reported that it spent $6.9 billion in cash during the quarter, and it ended the period with just $16.2 billion. GM said it had identified $5 billion in new actions to conserve cash, on top of an earlier plan to bolster its liquidity by $15 billion.

‘Significantly short’

Still, GM said it “will fall significantly short” of the cash needed to run its business in the first half of ‘09 unless economic conditions improve and the firm gets access to financial aid from the U.S. government.

GM’s announcement Friday will not affect the company’s SUV assembly plant in Arlington, which began working overtime this month and is scheduled to remain on overtime for the rest of the year. With other closures, the Arlington plant, which employs almost 2,500 workers, is the only GM factory building full-size sport utility vehicles such as the Chevrolet Tahoe, GMC Yukon and Cadillac Escalade.

While sales of the those vehicles are down, they have rebounded in recent weeks as gas prices drop and remain a solid source of revenue for cash-strapped GM. “We’re still on overtime,” said plant spokeswoman Wendi Sabo. “Nothing has changed.”

Earlier, Ford said it used $7.7 billion in cash in the third quarter, leaving it with $18.9 billion at the end of September.

Ford’s automotive business lost $2.9 billion in the quarter, and the company announced more cuts to conserve cash. Overall, Ford said it lost $129 million in the quarter, or 6 cents a share, helped by a $2 billion gain as it shifted some retiree health-care liabilities to a trust run by the United Automobile Workers union.

Ford said it expected to increase its cash on hand by $14 billion to $17 billion in the next two years. The company will eliminate as many as 2,200 salaried jobs by January. The company said it remained on track to reduce fixed costs this year by $5 billion.

IHS Global Insight analyst George Magliano said the cash problems reported by GM and Ford were worse than experts had thought. And that raised the risk of bankruptcy.

“It’s close,” he said about the possibility of one of the U.S. automakers filing for Chapter 11 bankruptcy protection. “Up until now, we knew the cash numbers were tough, but we didn’t know how bad.”

Fending off creditors

Companies that run out of cash generally can sell assets, cut costs or file for Chapter 11 protection to keep creditors at bay while they reorganize.

GM has said it could fall short of cash needed to operate in the first few months of next year, and Ford has said it has about seven months of money, Mr. Magliano noted.

If GM files for bankruptcy protection, Fitch Ratings analyst Mark Oline said, there’s “a very high risk” it would pull in Ford and Chrysler, because GM probably would be forced to discount vehicles deeply to generate cash for creditors, and other makers would be forced to follow.

GM, Ford and Chrysler chief executives met with House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid on Thursday about an emergency loan package. The meeting focused automakers’ request for up to $25 billion in loans to help the companies get through the worst vehicle market in 15 years and avoid bankruptcy protection.

Ford’s chief executive, Alan Mulally, said Ford was hopeful that the government would step in but was not factoring that into its planning. “We are not assuming that kind of help from the U.S. government at this time,” he said Friday. “We are absolutely going to continue to dialogue with the government and others, if things deteriorate, to keep this very important industry going.”

The loan request is in addition to $25 billion in low-interest loans administered by the Energy Department to assist automakers in developing more fuel-efficient vehicles.

Battered by economy

Automakers have been battered by a weak economy, rising gas prices, a sharp shift away from their most profitable products and a credit crisis that has emptied showrooms. The falloff has affected all automakers – sales were down 32 percent in October compared with the period a year ago.

“We are cutting to the bone,” said Fritz Henderson, GM’s president and chief operating officer. “What we want to try to do is size the business for this kind of volume level … and frankly, put us in much better shape when the industry improves.”

GM shares fell 44 cents, or 9.2 percent, to $4.36 in Friday’s trading. Ford shares rose 4 cents, or 2 percent, to $2.02.

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